The Moores are close to retirement. They agree to sell an antique urn to a local museum for

$17,000. Their tax adviser suggests that they defer receipt of this money until they retire, 5
years in the future. The museum agrees to pay them the $17,000 in a lump sum in 5 years.
Assume that the museum can earn 8% compounded annually on its money and that the
payment are made annually.

(a) Find the amount of each payment the museum must make into a sinking fund so that it
will have the necessary $17,000 in 5 years.

What i did=
n=5, i=0.08, S=17000
17000(0.08)/(1.08)^5-1= $2897.76
Is the answer correct? I feel like its not that easy and just go with the formula or am i having the wrong formula../

1 answer

You are correct.
It is that easy, since this is a very standard question.

You used the formula

Future Amount = Paym( (1+i)^n - 1)/i